Millennial investing app crosses into banking

Advisors have studied robo advisors for their appeal to young investors — but microinvesting sites are aggressively pursuing millennial clients too.

Stash Invest, which already has 1.2 million users signed up for its app and takes just $5 to open an investment account of ETFs, announced plans to launch savings and checking services next year.

The move signals a competitive rush by young fintechs to lay claim and grow with millennial clients, as microinvesting apps adopt the cross-selling techniques of big banks and wealth management firms they aim to disintermediate.

“We really listened to our customers over these last two years and they need more,” said Stash Invest CEO Brandon Krieg. “They needed guidance in savings and investments, but they need even more guidance managing their money.”

The company projects to have 2 million by the end of the year, with about 25,000 users signing up a week. According to its latest ADV form filing, Stash has roughly 983,000 investment accounts and $125 million in assets under management.

Krieg wouldn’t disclose which institution Stash has partnered with in creating these new services. Unlike many brick-and-mortar banks, he said, the company’s banking services will have no maintenance fees or account minimums.

Stash banking clients will be given a debit card and will have free access an ATM network of 55,000 ATMs across the country, according to the company.

Krieg added that Stash, whose average user is 29 years old, is not ready to offer a credit card. Instead, they will emphasize saving, which is why they will offer a personalized spend-and-bill tracker and an auto savings feature that puts small amounts of money away.

“Some people believe that consumption models are the best, but we believe in helping people save,” Krieg said. “This isn't for the wealthy and rich. What happens if someone trying to pay student debt is having a bad month? We want to help that maximize every dollar they have.”

Stash’s foray into banking is the latest example of a fintech offering a mobile-only bank account tied to a value-added service such as microinvesting.

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It’s a logical progression of offerings, said Lex Sokolin, director of fintech strategy at U.K.-based research firm Autonomous.

“Like SoFi, N26 and other neobanks, the most feasible strategy to survive once you reach scale at the attention level is to broaden the product offering,” Sokolin said. “It's the elusive cross-sell that Citi went after back in the last century.”

Stash charges a monthly $1 fee for investment accounts under $5,000, and 25 basis points on accounts higher. Users are left to make their own investments, as opposed to robo advisors that automatically allocate assets.

A broader product set would make Stash’s app more valuable as a holistic offering, Sokolin added, and gaining deposits could serve as a monetization strategy.

Senior analyst Davis Janowski at Forrester Research suggests Stash is able to offer these free services by absorbing bank costs, using a portion of the $40 million in its last round of funding from Coatue Management to do so.